TITLE:
Does the Derivatives Usage Affect Corporate Capital Expenditure? Evidence from China
AUTHORS:
Guiling Zhang, Zhaoqi Guo, Jianing Liu, Zheng Wang
KEYWORDS:
Derivatives, Capital Expenditures, Risk Management, Borrowing Capacity, Corporate Value
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.13 No.11,
November
27,
2023
ABSTRACT: Based on hand-collected data of financial
derivatives in listed firms of China, this paper discusses the impact of
derivative usage on capital expenditures in emerging markets. It is found that
the capital expenditure of derivative users is lower than non-users, and the mechanism is that
derivative usage reduces the company’s borrowing capacity. The results remain
robust after the test of sensitivity test and control of endogeneity. Further
research shows that the higher derivative usage intensity, the lower the capital
expenditure; The implementation of accounting standards such as Fair Value
Measurement has mitigated the adverse impact of derivative usage on capital
expenditures; The effect of using derivative to reduce capital expenditures
mainly occurs in non-SOEs. From the perspective of economic consequences, the
corporate value of derivative users is lower, and the change of derivative
accounting standards helps to alleviate the adverse impact of derivatives on
corporate value.